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Reverse Course When a Borrower Dies

After a borrower with a reverse mortgage dies, heirs need to act quickly—or risk foreclosure proceedings.

By

Anya Martin

Dec. 3, 2014 11:33 a.m. ET

Reverse mortgages give older homeowners income by tapping into their home’s equity. But when the homeowner dies, heirs must act fast or they’ll risk foreclosure.

The vast majority of reverse mortgages are home-equity conversion mortgages insured by the Federal Housing Administration (FHA). Borrowers are allowed to tap into 50% or more of their home equity up to a maximum loan amount of $625,500. However, the FHA has stringent repayment rules that lenders must follow upon the death of the last mortgage-holder on the note.